28 September 2022

Why social democrats need to learn to defend the market economy


This year’s Labour conference started in an unusual way, with a rendition of the national anthem by the delegates. Despite the usual little Twitter meltdown and some pearl-clutching in The Guardian, it all went smoothly and without incident. There was no heckling, no booing, no unrolling of banners saying ‘This is literally fascism!!’, and no counter-choir trying to drown out the anthem with chants of ‘Oh Jeremy Corbyn’. It was quite a gamble, because any of these things could very easily have happened.

The thing about Labour is that they are (at least) two parties in one: a woke socialist party and a moderate social democratic party. The socialist quasi-party is running its own parallel quasi-party-conference, The World Transformed (TWT), with a speakers’ list that includes all the usual suspects: Zarah Sultana, John McDonnell, Diane Abbott, Jon Trickett, Ian Lavery, Richard Burgon, Nadia Whittome, Owen Jones, the Novara Media team, and most obviously, Jeremy Corbyn. In the Corbyn years, TWT and the official party conference were complementary events. They have since become competitors.

Of course, all political groups beyond a certain size are, in effect, coalitions, with factions that can be ideologically very far apart. But the split in the labour movement is unusual in two respects.

Firstly, there is the sheer breadth of the ideological rift. When asked to outline the kind of society they want to live in, social democrats usually describe a somewhat idealised version of Sweden or Denmark. TWT, on the other hand, say in their profile:

“We are fundamentally opposed to capitalism […]

Our vision is for a […] classless society […] where social life is organised around common ownership rather than private property”.

This is not a difference in degree. It is a qualitative difference. Sweden and Denmark have sky-high taxes and huge welfare states, but they are nonetheless clearly capitalist market economies. If one group believes in reforming capitalism, while another group believes that capitalism is irredeemable and must be overthrown, then those groups are not, in a meaningful sense, political allies.

Secondly, and more curiously, only one side of that divide can clearly articulate where they differ from the other, and defend their own position. There are plenty of statements from socialists explaining why they reject social democracy, but there are hardly any social democrats who can – or want to – return that favour.

What social democrats do instead is distance themselves from socialists in indirect ways. This is where the singing of the national anthem comes in, because this is one such way.

The more conventional way is to hide behind the electorate: ‘I agree with you in theory, but we are not going to get elected on that basis, and our main priority has to be to win elections.’ That way they can pretend that a difference of principle is really just a difference in strategy, and thereby avoid difficult arguments.

But it is also fundamentally dishonest. A social democrat is not simply a socialist who believes that socialism is, electorally, a lost cause, and settles for social democracy as the lesser evil. A social democrat is someone who would not want full-on socialism, even if this were a vote-winning strategy.

As the Political Economist Prof Geoffrey Hodgson explains:

‘There is a simple test to distinguish a socialist from a social democrat […]

To be a social democrat it is not enough to accept markets and a mixed economy […] After all, a mixed economy could be accepted as a temporary staging post in the transition to full-blooded socialism, as Vladimir Lenin did with his New Economic Policy in 1921.

A modern social democrat must go further. He or she must make a clear and positive case why markets, competition and a private sector are more than a temporary expedient. It must be argued that these things are indispensable, both for economic efficiency and the preservation of freedom.’

Social democrats in the British labour movement have forgotten how to make such a positive case for the market economy. Social democrats clearly do believe that, despite all their criticism, capitalism also has some good features, which are worth preserving. But they cannot explicitly spell out what those are, and why they want to preserve them. They are good at explaining why they reject “Thatcherism” or “Trickle-Down Economics” or “neoliberal capitalism”, as they see it, which is all well and good – but if you think contemporary capitalism is so terrible, you also need to be able to explain why you want to keep it at all.

For socialists, this is all, understandably, very frustrating. To them, it seems as if social democrats share all their criticisms of the current system, but then, inexplicably, fail to support their alternative.

Imagine two flatmates, Peter and Paul, who are not especially happy with the state of their current flat, and who sometimes talk about moving out together. But even though they usually criticise the same things about the flat, there is a crucial difference.

Peter has completely given up on the place, and cannot wait to move out. Far out. Ideally, he wants to move in with a new commune that some his friends are setting up on an abandoned farm.

Paul, on the other hand, does not really mean it when he says he wants to move out. He still likes a lot of things about the place, and believes that it just needs a thorough refurbishment, which he plans to do as soon as he gets the chance. Nor does he have much time for Peter’s hippie friends. He knows that they have set up similar communes in the past, and that they all fell apart soon after. (Peter knows that too, but he believes that this time will be different.)

But Paul does not want to seem like the boring, unadventurous one. So he cannot bring himself to honestly say, ‘Sorry Peter, but if you want to move out, you’ll have to go on your own. I’m staying. I know that the place needs a lot of work, but there are also many things that I like about it.’

Instead of openly saying that, Paul drags his feet. Whenever Peter wants to make plans for moving, Paul tries to change the subject. Peter notices that, but does not understand the reason why. So he grows increasingly resentful of Paul, and accuses him of being in cahoots with the landlord. Paul, in turn, starts to play a song that he knows really winds up Peter, in order to keep him away.

For the moderate left, the smooth rendition of the national anthem at the conference is both a triumph and a capitulation. It is a triumph, because it is a way of signalling that Labour is not a Corbynite party anymore. But it also shows that the social democrats still accept the cultural dominance of the Corbynites. They would rather troll them with a song that they hate than take them on in an open debate.

Why not a panel discussion at a conference fringe event, with a title like ‘Socialism vs Social Democracy’, or ‘Capitalism – reformable, or irredeemably flawed?’, or ‘Denmark vs Cuba – where should the left look for, for inspiration?’.

The socialist side would find it incredibly easy to fill their side of such a panel. But could the social democratic side fill theirs?

Click here to subscribe to our daily briefing – the best pieces from CapX and across the web.

CapX depends on the generosity of its readers. If you value what we do, please consider making a donation.

Kristian Niemietz is Head of Political Economy at the Institute of Economic Affairs.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.